Africa Oil Provides Operational Update and First Quarter Results

VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 14, 2014) - Africa Oil Corp. (TSX:AOI)(OMX:AOI) ("Africa Oil" or the "Company") is pleased to provide first quarter 2014 financial results and an update on its operations in Kenya and Ethiopia.

The Company currently has six rigs operating in Kenya and Ethiopia which are focused on three main activities; 1) Drilling new basin opening wells; 2) Drilling new prospects in the discovered basin in Northern Kenya; and 3) appraising and testing existing discoveries.

Two basin opening wells are currently drilling with results expected in the second quarter of 2014. The Sala prospect, on Block 9, is being drilled in the Cretaceous Anza graben and will test a large anticlinal feature along the northern basin bounding fault. This well is operated by Africa Oil which holds a 50% interest and operatorship with partner Marathon Kenya Limited B.V. holding the remaining 50%.

The other new basin opening well is the Shimela well being drilled in the Chew Bahir basin on the South Omo block in Ethiopia. This basin is located along the Tertiary rift trend and has many similarities to the recent discoveries in Kenya. The rig will move to the Gardim prospect following the completion of Shimela which is a basin bounded fault prospect located in the southern portion of this basin. The Company holds a 30% working interest in this block along with operator Tullow Oil plc ("Tullow") (50%) and partner Marathon Ethiopia Limited B.V. (20%).

Plans are also underway to drill prospects in three additional new basins this year. The Dyepa-1 well will spud in the second quarter and will target the South Kerio basin which is proximal and geologically similar to the discovered basin in Northern Kenya in Block 10BB. This well is designed to test a basin bounding fault prospect on the western flank of the basin similar to the string of pearls field discoveries such as the initial Ngamia discovery. A number of additional prospects have been identified in this basin which would be de-risked if Dyepa is a discovery. This rig will then move to test the Aze prospect which is located in the North Kerio basin and is comprised of a large, four-way dip closed anticline on the southern shore of Lake Turkana.

The last basin to be targeted this year is the West Turkana basin in Block 10BA in Kenya and the first well in this program is expected to spud later this year. The first prospect to be drilled will be the Engomo (formerly Kiboko) prospect on the western shore of Lake Turkana. It is also a basin bounding fault prospect and has similar potential to prove a petroleum system that would lead to accelerated drilling on a number of identified prospects. In both of these basins, as in the discovered basin in Northern Kenya, the Company holds a 50% working interest along with Operator Tullow Oil plc (50%).

The only well which is currently being drilled on a new prospect in the discovered basin in Northern Kenya is the Ekunyuk-1 well which is located on the eastern flank play, on trend with recent discoveries at Etuko and Ewoi. The well has now reached a final total depth of 1,802 meters and has encountered some 5 meters of net oil pay, within approximately 150 meters of reservoir quality water-bearing sandstone and an equal thickness of a basin-wide rich oil shale. This rig will now be moved to the Agete-2 location.

Three additional rigs are currently pursuing appraisal and testing activities on the existing discoveries. The Sakson PR5 rig is continuing drilling operations on the Twiga-2 up-dip appraisal well. The initial wellbore was drilled near the basin bounding fault and encountered some 18 meters of net oil pay within alluvial fan facies, with limited reservoir quality. A decision was made to sidetrack the well away from the fault to explore north of Twiga-1 and some 62 meters of vertical net oil pay has been discovered in the Auwerwer formation, similar in quality to the initial Twiga-1 discovery. The well is currently being deepened to evaluate the Lower Lokhone sand reservoirs and a testing program for this successful well is planned to be conducted later this year. This rig will then move to drill a down-dip appraisal of the Amosing discovery, which appears to have high quality reservoir and may be one of the largest discoveries in the basin to date.

The PR Marriott 46 rig is currently drilling ahead on the Ngamia-2 appraisal well which is expected to be completed by the end of the second quarter. This rig will then drill the Ngamia-3 appraisal well.

Testing operations are ongoing on the Agete-1 well using the SMP-5 rig and expected to be completed by the end of May. The plan is for this rig to continue testing operations on discovery and appraisal wells in the discovered basin in Northern Kenya.

Additionally in Ethiopia, the Company has recently completed the drilling of the El Kuran-3 appraisal well on Block 8. El Kuran-3 was an appraisal of a discovery made by Tenneco in the 1970's, and encountered a significant but tight gas-condensate zone in Jurassic Hammanlei carbonates. The well has been suspended pending a decision on conducting a fracture stimulation, which will be required to assess the long-term productivity of the formation. Discussions are ongoing with the Government of Ethiopia to secure an extension to the Exploration Period under the PSC to assess the economic viability of the discovery.

Africa Oil CEO Keith Hill stated: "We are looking forward to the results of the new basin opening wells which have the potential to unlock significant value in terms of new prospects and resources. The ongoing drilling in the discovered basin in Northern Kenya has been quite helpful in understanding the distribution of the best reservoir facies and will no doubt be enhanced by the ongoing 3D seismic survey. We remain very bullish in not only the existing discoveries but in the remaining prospects in the discovered basin in Northern Kenya such as Etom, the largest remaining prospect along the Western 'String of Pearls' trend, which will be drilled in the third quarter of this year. Our goal is to open up at least one new basin and to move a significant number of barrels from prospective to contingent resources by the end of 2014 as we move the field development program forward."

The Company is also actively pursuing development studies in the Block 10BB/13T area including commencement of the pre-front end engineering design (pre-FEED) and environmental and social impact assessment (ESIA) studies for the pipeline, export terminal and field facilities. It is the goal the Government of Kenya and the joint venture partnership to achieve project sanction, including the approval of an export pipeline, by the end of 2015/early 2016.

As was previously announced, the company has now graduated to the main board of the TSX and plans to apply for graduation to the NASDAQ OMX Stockholm main board.

Further Significant Events During The First Quarter of 2014:

Africa Oil ended the quarter with cash of $434.3 million and working capital of $360.1 million.

In January, the Company announced a new oil discovery at Amosing-1 located seven kilometers southwest of the Ngamia-1 discovery along the Basin Bounding Fault Play in Block 10BB. Logs indicated 160 to 200 meters of potential net oil pay in good quality sandstone reservoirs.

In January, the Company announced a new oil discovery at Ewoi-1 located four kilometers to the east of the Etuko-1 discovery in the Basin Flank Play on the eastern side of the discovered basin in Northern Kenya in Block 10BB. Logs indicated potential net pay of 20 to 80 meters to be confirmed by well testing.

In February, the Company announced the results of five well tests conducted on five Lokhone pay intervals at Etuko-1 located on the Basin Flank Play in Block 10BB. Light 36 degree API waxy crude oil was successfully flowed from three zones at a combined average rate of over 550 barrels of oil equivalent per day. In March, the Company announced the results of the Etuko-2 exploration well drilled to test the upper Auwerwer sands overlying the previously announced Etuko discovery. Etuko-2 penetrated a potential significant oil column identified from formation pressure data and oil shows while drilling and in core, with good quality reservoir but flowed only water on drill stem test. The results are considered inconclusive and analysis is underway to consider further options to evaluate this reservoir.

In March, the Company announced the results of a well test on the Ekales-1 discovery drilled in 2013 and located on the Basin Bounding Fault Play between the Ngamia-1 and Twiga South-1 discoveries. Testing operations on the Ekales-1 well confirmed this significant oil discovery. Two drill stem tests were completed and flowed at a combined rate of over 1,000 bopd from a combined 41 meter net pay interval. The upper zone had a very high productivity index of 4.3 stb/d/psi.

In March, the Company announced the results of the Emong-1 well located four kilometers northwest of Ngamia-1 field discovery in Block 13T (Kenya). The well encountered oil and gas shows while drilling, however the Auwerwer sandstones that are the primary reservoirs in the Ngamia field were thin and poorly developed in Emong-1 and the well was plugged and abandoned. It is believed that the reservoir was poorly developed due to its proximity to the basin bounding fault and its location within what appears to be a local isolated slumped fault margin. This well, which was trying to establish an additional play, has no impact on the potential of the Ngamia oil accumulation or any other prospectivity in the discovered basin in Northern Kenya.

In Blocks 10BB and 13T, the acquisition of a 550 square kilometer 3D seismic program over the discoveries and prospects along the Basin Bounding Fault Play in the discovered basin in Northern Kenya is ongoing and is scheduled to complete at the end of the third quarter.

In March, the Company completed a farmout transaction with Marathon whereby Marathon acquired a 50% interest in the Rift Basin Area leaving the Company with a 50% working interest. In accordance with the farmout agreement, Marathon was obligated to pay the Company $3.0 million in consideration of past exploration expenditures, and has agreed to fund the Company's working interest share of future joint venture expenditures to a maximum of $15.0 million with an effective date of June 30, 2012. Upon closing of the farmout, Marathon paid the Company $3.0 million in consideration of past exploration expenditures. Subsequent to the quarter end, Marathon paid the Company $10.2 million being Marathon's and the Company's share of exploration expenditures from the effective date to the closing date of the farmout.

In March, the Company completed a farmout transaction with New Age whereby New Age acquired an additional 40% interest in the Company's Adigala Block leaving AOC with 10% working interest. In accordance with the farmout agreement, New Age is obligated to fund the Company's 10% working interest share of expenditures related to the acquisition of a planned 1,000 kilometer 2D seismic program to a maximum expenditure of $10.0 million on a gross basis, following which the Company would be responsible for its working interest share of expenditures.

The Company has a significant exploration and appraisal program set out for 2014 which will see over 20 wells completed. The program is focused on drilling out the remaining prospect inventory in the discovered basin in Northern Kenya, appraising existing and future discoveries with the aid of the new 3D Seismic survey, drilling six new basin opening wells and progressing development studies towards project sanction in the discovered basin in Northern Kenya. This significant program in 2014 is fully funded.

Weighted average number of shares outstanding for the purpose of calculating earnings per share

Basic

309,967,060

252,165,938

Diluted

309,967,060

252,165,938

Operating expenses increased $9.5 million for the three months ended March 31, 2014 compared to the same period in the prior year. The increase of $8.9 million in stock-based compensation is attributable to 5,958,500 stock options of AOC issued to directors, officers and employees in the first quarter of 2014 of which one-third vested immediately. The Company made $0.8 million and $0.1 million of donations to the Lundin Foundation in the first quarter of 2014 and 2013, respectively, resulting in a $0.7 million increase in operating expenses.

Financial income and expense is made up of the following items:

(Thousands of United States Dollars)

(Unaudited)

March 31,

March 31,

2014

2013

Fair value adjustment - warrants

(4

)

2,727

Interest and other income

436

372

Bank charges

(6

)

(8

)

Foreign exchange loss

(116

)

(1,043

)

Finance income

436

3,099

Finance expense

(126

)

(1,051

)

At March 31, 2014, nil warrants were outstanding in AOC and 9.5 million warrants were outstanding in Horn. AOC holds 2.2 million of the warrants outstanding in Horn. The Company recorded a $0.004 million loss on the revaluation of warrants for the three months ended March 31, 2014 due to an increase in Horn's share price. The Company will record fair market value adjustments on the Horn warrants until they are exercised or they expire (all expire in June 2014).

Interest income increased in the first quarter of 2014 due to an increase in cash as a result of the brokered private placement in October of 2013.

Foreign exchange gains and losses are primarily related to changes in the value of the Canadian dollar in comparison to the US dollar. Historically, the Company has recorded foreign exchange gains when the Canadian dollar has strengthened versus the US dollar, and has recorded losses when the Canadian dollar has weakened versus the US dollar.

Consolidated Balance Sheets

(Thousands United States Dollars)

(Unaudited)

March 31,

December 31,

2014

2013

ASSETS

Current assets

Cash and cash equivalents

$

434,333

$

493,209

Accounts receivable

11,926

3,195

Prepaid expenses

1,332

1,379

447,591

497,783

Long-term assets

Restricted cash

1,700

1,250

Property and equipment

94

103

Intangible exploration assets

567,907

488,688

569,701

490,041

Total assets

$

1,017,292

$

987,824

LIABILITIES AND EQUITY

Current liabilities

Accounts payable and accrued liabilities

$

87,482

$

57,976

Current portion of warrants

5

1

87,487

57,977

Total liabilities

87,487

57,977

Equity attributable to common shareholders

Share capital

1,009,953

1,007,414

Contributed surplus

33,159

24,396

Deficit

(161,874

)

(150,736

)

881,238

881,074

Non-controlling interest

48,567

48,773

Total equity

929,805

929,847

Total liabilities and equity

$

1,017,292

$

987,824

The increase in total assets from December 2013 to March 2014 is primarily attributable to intangible exploration expenditures incurred during the quarter in Kenya, Ethiopia and Puntland (Somalia).

The decrease in cash for the three months ended March 31, 2014 is mainly the result of intangible exploration expenditures and cash-based operating expenses, offset partially by proceeds received on the Rift Basin Area farmout.

Consolidated Statement of Equity

(Thousands United States Dollars)

(Unaudited)

March 31,

March 31,

2014

2013

Share capital:

Balance, beginning of period

$

1,007,414

$

558,555

Exercise of options

2,539

-

Balance, end of period

1,009,953

558,555

Contributed surplus:

Balance, beginning of period

$

24,396

$

12,123

Stock based compensation

9,552

697

Exercise of options

(789

)

-

Balance, end of period

33,159

12,820

Deficit:

Balance, beginning of period

$

(150,736

)

$

(98,076

)

Net loss and comprehensive loss attributable to common shareholders

(11,138

)

(1,874

)

Balance, end of period

(161,874

)

(99,950

)

Total equity attributable to common shareholders

$

881,238

471,425

Non-controlling interest:

Balance, beginning of period

$

48,773

$

47,551

Net income (loss) and comprehensive income (loss) attributable to non-controlling interest

(206

)

1,762

Balance, end of period

48,567

49,313

Total equity

$

929,805

$

520,738

The Company's consolidated financial statements, notes to the financial statements, management's discussion and analysis for the three months ended March 31, 2014 and the 2013 Annual Information Form have been filed on SEDAR (www.sedar.com) and are available on the Company's website (www.africaoilcorp.com).

Outlook

The Company expects to have six drilling rigs operating through the remainder of 2014, one of which is currently being utilized as a testing and completion rig. Completion of the brokered private placement in October 2013 increased the Company's liquidity and capital resource position which is expected to fully fund the Company's portion of 2014 exploration, appraisal and development activities.

The near term focus of exploration is to continue drilling and testing wells in the discovered basin in Northern Kenya improving on recent cost efficiencies realized while continuing to grow the Company's contingent resource base, and to drill potential basin-opening wells in the Turkana, Chew Bahir, Kerio, and Anza basins within Kenya and Ethiopia.

Given the significant volumes discovered and the extensive exploration and appraisal program planned to fully assess the upside potential of the basin, the Tullow-Africa Oil joint venture has agreed with the Government of Kenya to commence development studies. In addition, the partnership is involved in a comprehensive pre-FEED study of the export pipeline. The current ambition of the Government of Kenya and the joint venture partnership is to reach project sanction for development, including an export pipeline, by the end of 2015 or early 2016. The Government is already making progress, having recently announced its intention to invite Expressions of Interest for the feasibility study, engineering design and development of a Kenya crude export pipeline. If further exploration success opens additional basins there will be scope for the development to be expanded.

In 2014, the Company expects to drill six new basin opening wells, drill all key prospects in the discovered basin in Northern Kenya, appraise existing discoveries, and progress development studies towards project sanction in the discovered basin in Northern Kenya.

Africa Oil Corp. is a Canadian oil and gas company with assets in Kenya and Ethiopia as well as Puntland (Somalia) through its 45% equity interest in Horn Petroleum Corporation. Africa Oil's East African holdings are in within a world-class exploration play fairway with a total gross land package in this prolific region in excess of 215,000 square kilometers. The East African Rift Basin system is one of the last of the great rift basins to be explored. Seven new significant discoveries have been announced in the discovered basin in Northern Kenya in which the Company holds a 50% interest along with operator Tullow Oil plc. Good quality existing seismic show robust leads and prospects throughout Africa Oil's project areas. The Company is listed on the TSX and on First North at NASDAQ OMX-Stockholm under the symbol "AOI".

FORWARD LOOKING INFORMATION

Certain statements made and information contained herein constitute "forward-looking information" (within the meaning of applicable Canadian securities legislation). Such statements and information (together, "forward looking statements") relate to future events or the Company's future performance, business prospects or opportunities. Forward-looking statements include, but are not limited to, statements with respect to estimates of reserves and or resources, future production levels, future capital expenditures and their allocation to exploration and development activities, future drilling and other exploration and development activities, ultimate recovery of reserves or resources and dates by which certain areas will be explored, developed or reach expected operating capacity, that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.

All statements other than statements of historical fact may be forward-looking statements. Statements concerning proven and probable reserves and resource estimates may also be deemed to constitute forward-looking statements and reflect conclusions that are based on certain assumptions that the reserves and resources can be economically exploited. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "seek", "anticipate", "plan", "continue", "estimate", "expect, "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions) are not statements of historical fact and may be "forward-looking statements". Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. The Company does not intend, and does not assume any obligation, to update these forward- looking statements, except as required by applicable laws. These forward-looking statements involve risks and uncertainties relating to, among other things, changes in oil prices, results of exploration and development activities, uninsured risks, regulatory changes, defects in title, availability of materials and equipment, timeliness of government or other regulatory approvals, actual performance of facilities, availability of financing on reasonable terms, availability of third party service providers, equipment and processes relative to specifications and expectations and unanticipated environmental impacts on operations. Actual results may differ materially from those expressed or implied by such forward-looking statements.

ON BEHALF OF THE BOARD

Keith C. Hill, President and CEO

Africa Oil's Certified Advisor on NASDAQ OMX First North is Pareto Öhman AB.